The Next Government Takeover: Student Loans

There has been much speculation that today’s Massachusetts Senate race is a referendum on health care. That may be an understatement. My guess is that this senate race could have even larger repercussions.

During an appearance on “Fox News Sunday,” this past week, Senate Minority Leader Mitch McConnell put it well when he said that President Obama’s plan to bring about “change” to America wasn’t merely limited to health care. As McConnell noted,

“This arrogant attempt to have the government take over one-sixth of the economy on the heels of running banks, insurance companies, car companies, taking over the student loan business, doubling the national debt in five, tripling in 10. You’ve got … sort of widespread public revulsion.”

Indeed, health care is not all that hangs in the balance. A September Wall Street Journal columnoutlined President Obama’s next move (presumably, after passing health care): A $100 billion a year government takeover of school loans.

Obama’s allies already pushed the bill through the House, and it now resides in Sen. Tom Harkin’s Senate Health, Education, Labor and Pensions (HELP) Committee, where hearings are soon to be scheduled.

What is more, a Scott Brown victory, which would deprive Democrats of a filibuster-proof majority, may still not be enough to deter the liberals from passing it.

Harkin has threatened to “fast track” the legislation by using the reconciliation process, a maneuver which would allow Democrats to pass a bill with a simple majority (as opposed to 60 votes).

Still, while a Scott Brown victory wouldn’t mathematically eliminate the possibility of a student loan takeover, it would greatly deter liberal Senators from pushing for yet another unpopular big government grab – especially via the controversial method of reconciliation.

Regardless, should Harkin and Obama succeed, all private lenders would be excluded from making government-guaranteed student loans. There will be no government-guaranteed loan option for students other than federal loans (and, as the Journal notes, “The remaining 20% of the market that is now completely private will likely shrink further as lenders try to comply with regulations Congress created last year.”)

Democrats claim the bill would save millions, but they fail to mention it will cost jobs — tens of thousands of private sector jobs — (as if we could stand to lose jobs right now). Aside from that, the bill would obviously transfer even more control from the private sector to the government.

It’s also worth pointing out that this move contradicts previous statements made by both President Obama and Senator Harkin. For example, during his September 9, 2009 speech to Congress, President Obama said, “My guiding principle is and always has been that consumers do better when there is choice and competition. That’s how the market works.”

Likewise, during a July MSNBC appearance regarding the public option, Senator Harkin said, “The one thing, I think, the people understand that we have to have is, we have to have choice and competition.”

The question, of course, is whether or not all this talk about “choice” and “competition” is just talk.

Most likely, the threat of electoral defeat will have a greater impact on whether or Senators support this bill than the need for rhetorical consistency. As such, it’s fair to say that Scott Brown’s campaign transcends even the health care debate – his victory on Tuesday could dramatically impact Obama’s entire effort to “transform” the American system. It would send a message loud and clear.